Robert Hegarty
Traders Magazine Online News

Reinventing Trading Venues: How AI Can Help Create a More Efficient Market

In this whitepaper shared with Traders Magazine, the Hegarty Group examines how artificial intelligence and machine learning can help traders execute more efficiently.

Traders Poll

If Members Exchange (MEMX) gets SEC approval and launches, do you think it will force downward pressure on market data fees?

Free Site Registration

February 1, 2011

Buyside Gets More Info Via FIX

By Peter Chapman

In addition to venue, FPL is also asking the sellside to populate the "Last Capacity" field. This denotes whether the broker handled the trade on an agency, principal or riskless principal basis.

Finally, FPL has created a new field within FIX protocol to denote whether the order took liquidity or provided it. Many exchanges and ECNs price their services by charging liquidity takers and paying liquidity suppliers.

For some buyside traders, none of this information is new. Their brokers have been supplying it in real-time or end-of-day custom reports for a while. But others have received nothing. The amount and types of information received and from which brokers varies, depending on the buyside desk.

In addition, brokers may provide the information in different ways, using different nomenclature for venues, for example, or using different fields for the same information. FPL hopes the initiative will lead to consistency among broker practices.

David Lewis, Franklin Templeton's head of U.S. stock trading in Fort Lauderdale, Fla., said the improved transparency allows traders to take greater control of their orders, making it easier to adjust a strategy when they need to.

The thrust of FPL's work is to get the sellside to transmit trade information to the order management systems of the buyside. Most of the members of the working group are large firms with their own systems, but other buyside desks rely on vendor OMSs. Those vendors may have to make changes to their systems to accommodate FPL.

Not every broker is waiting for a push from FPL to start delivering venue information. Wedbush Securities, for instance, recently launched a Web page that gives its customers immediate access to their trading information. It shows them where they executed; where they passed through; whether they took or supplied liquidity; and other relevant--so-called liquidity flag--data.

The information gives the buyside more control over their brokers' algorithms, said Kevin Beadles, in charge of equity trading at Wedbush. "Our competitors are slicing and dicing buyside orders and putting them in all these different places. So the institutions have less control over their orders. We give it back to them. If they see they are capturing more liquidity on Nasdaq OMX BX, for instance, they can direct more of their flow to BX."


(c) 2011 Traders Magazine and SourceMedia, Inc. All Rights Reserved.